How to maximise the ROI on a Melbourne townhouse property development
When considering a Melbourne townhouse multi-unit development project, you’ll want to do your due diligence prior to commencing.
If you’re a new developer, or taking on a property development project larger or different to what you’ve completed before, knowing the right numbers to run can be difficult.
What is the average return on a Melbourne Townhouse investment?
Although many investors can expect a return of 10-20% on a Melbourne property development investment project. This number is subject to a host of factors, and your project ROI may be higher or lower.
Whatever your financial goals and desired ROI, testing the potential of your multi-unit townhouse development profit is the first step, prior to committing to the project.
A successful townhouse development comes down to thorough planning and research. This process begins with the most important planning step, a Feasibility Assessment.
What is a Melbourne Townhouse feasibility assessment?
A property development feasibility assessment takes into account the total costs, and projected income. Costs include initial land costs, as well as planning expenses, bank payments, plus fees and construction costs.
These costs are contrasted with the current property market prices (likely sale costs or rental yield) to find out your potential return on investment for the project (ROI).
How to conduct a townhouse property development feasibility assessment:
STEP 1: Determine land capacity.
You need an accurate understanding of the capacity of your land (how many townhouses you can build) before you can move forward. This is determined by the local council and related to the size and shape of the land.
STEP 2: Conduct market research
Market research involves looking at pricing for similar properties in the area you’re planning to build in. Look at either or both of sales prices and rental prices, depending on your goals and investment strategy.
STEP 3: Research expected costs for a townhouse project
Estimated costs can be difficult to ascertain, and there’s usually more involved than many realise. Getting professional support in this area is recommended. delcon design and construct provide Feasibility Assessments for townhouse projects in Melbourne.
The main costs to consider include:
- Initial costs
- Planning and preliminaries
- Construction costs
- Other costs (Such as taxes and real estate agent fees)
STEP 4: Total cost breakdown
Take your time with this, and breakdown your costs into the following categories:
- Land Purchase
- Acquisition
- Bank deposit
- Bank deposit amount
- Estimated stamp duty/legals
- Lenders mortgage insurance (IF applicable)
- Cash requirement
- Loan amount
- Anticipated Finance interest Rate
- Total Finance
- Loan to value ratio
- Land loan amount
- Construction loan amount
- Total finance
4.Project forecast
- Total Development Cost
- Anticipated Sale Prices
- Unit 1 Target Sale Price
- Unit 2 Target Sale Price
- Unit 3 Target Sale Price
- Liabilities and third party expenses
- Council public open space contribution (applicable only to 3 or more units)
- Anticipated construction interest
- Anticipated land interest
- Anticipated agent fees inc GST
- Anticipated expenses such as Legals and sub division costs
Click here to view a sample multi-unit property development summary.
Can a townhouse property development builder conduct a feasibility assessment for me?
Yes! Many multi-unit development builders offer Feasibility Assessments. However, be sure to contact a builder with a strong development reputation. Some multi-unit builders have been known to manipulate numbers and portray a stronger position (lower costs and higher return) in order to gain your business.
For clients in Melbourne, delcon design and construct offer a free, no obligation feasibility assessment.
With over a decade of experience in multi-unit property development in Melbourne, we support clients to maximise their ROI through specialised design, and efficient high quality construction.Contact our multi-unit townhouse development team at delcon design and construct on: 1800 335266 or email: info@delcon.net.au